Monday, May 6, 2019

Q1 GDP Expected at 2.3% - Today we finally got the first estimate for the U.S. GDP in the first quarter of 2019, and typically the first quarter of the year has been rather weak. That has been the experience pretty much going back through the Barack Obama administration. And the consensus was for a 2.3% rise in Q1 GDP, that would have been just a slight improvement over the 2.2% number that we got for the 4th quarter of 2018.Expectations Were Low - If you remember, way back, a couple of months ago, everybody was really low. You had a lot of people who were looking for Q1 GDP to come out with a zero handle. But they had been ratcheting up those expectations now to a consensus of 2.3%. A lot of it had to do with the fact that the trade deficits had come in a lot smaller than people thought. I think the reason for that is because the trade deficit really ramped up in the last couple of quarters, probably because businesses were trying to front-run the tariffs that were supposed to come in at the end of last year. That might have caused extra imports to try to get things in under the gun before they were subjected to the tariffs. So because we pulled all that forward, imports weren't as much in the first quarter, so they did not subtract as much from the GDP.Inventories Continued to Build - Also, the inventories continue to build, but most importantly, because they weren't selling. Goods weren't selling as much - inventories were building. That ended up helping. We ended up getting a number that was much bigger than consensus. We actually got 3.2% GDP growth for Q1.Delaying the Day of Reckoning - Now, before you get all excited, "Aha, Peter, you were totally wrong on this, you were looking for a weak number…" - first of all, a lot of people were looking for a weak number. It wasn't just me. But I do believe that we simply delayed the day of reckoning by a quarter. I think this time, it's going to be the second quarter that will be a big disaster.

Wednesday, May 1, 2019

Removal of Sanction Exemptions Drives Oil Prices Up - The markets have been quiet around the holidays. The big story today in the markets was the price of crude oil - up about $1.60/barrel. We're now at $65.71 per barrel. This is a new high for the year. Today, the catalyst was the Trump administration announcing that they would be withdrawing the exemptions that allow certain countries such as Japan, India, China - a number of countries currently buying oil from Ira. Now we're saying no more exemptions. They're saying, if you buy oil from Iran, then you're going to get sanctioned. Generally, what that means is the U.S. is going to shut you out of access to the dollar-based financial system - wiring and using the resources of the Fed. Considering that most of the world still transacts internationally in U.S. dollars is a very very serious punishment that the U.S. is able to dole out to any nation that does not do its bidding.Effect on our Trading Partners? - Now, of course, this angers our trading partners who do not like being dictated to by the United States, they do not like the United States being able to tell them who they can and cannot do business with, and to punish them if they do not do what the United States says. Of course, this is all a function of the U.S. dollar being the reserve currency, which certainly gives nations like China, or like Russia or any other nation an incentive to try to move away from the U.S. dollar as a reserve currency.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, April 1, 2019

If you remember, when I was forecasting that this was going to happen, at the very beginning, in fact even before the Fed began to shrink its balance sheet, before the Fed raised rates for the first time, I said that if they ever tried to normalize interest rates, if they ever tried to shrink the balance sheet, they would ultimately abort the process - that they would fail in their mission. They could not complete the journey. It would create a huge problem for the Fed, which up until this point, it hasn't happened yet. Nobody really appreciates what the Fed has done.There Will Be an Excuse - A lot of the people in the investment community are still buying at face value what the Fed is saying. But remember, when I said the Fed was going to announce that it was going to stop the rate hikes or call off quantitative tightening, I said at the time, that they were going to come up with an excuse. That the Fed was not going to tell the markets the truth about why it had aborted this mission - it was just going to make up an excuse. The Fed had to pretend that they could actually do this - that they were going to normalize interest rates, that they were going to shrink their balance sheet but something prevented them from doing it.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, March 25, 2019

"Apparently, nobody has explained to Donald Trump how the stock market works. Buy the rumor sell the fact. Maybe the President has more experience in the real estate market, not understanding how the stock market generally anticipates news, and sells off on the realization of that news."

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Monday, March 18, 2019

Smarter Money Selling into this Rally - I do believe that we're going to be running into resistance again at this area - but that was probably an opportunity for some people, they saw that dip and they rushed in and they bought other stocks. Typically there's some kind of news event that would coincide with some type of inflection point in the market. I don't think it's a significant low; I just think it is a low in an ongoing process, this bear market rally, this correction in the bear market is not ending quickly, but I do believe it is ending. I think the smarter money is selling into this rally.Retail Sales: December was not a Fluke - The economic news - a couple of items that came out this week were a little better than estimated. But look at the Retail Sales number that came out on Monday. That one, to me, still confirms that the numbers that we got in December were not a fluke. A lot of people initially dismissed the weak number in December. The initial report for December Retail Sales was -1.2. They were looking for a rebound in January and the got one. They were only looking for a rebound of .1 and they got a rebound of .2. They actually revised the prior month that was originally reported as down 1.2, that moved to down 1.6. So an even bigger decline December than was originally reported. Remember, this is a 10-year low.

Peter Schiff is a smart investor and author of several best selling books. He correctly predicted the economic meltdown of 2008 - 2009

Thursday, February 28, 2019

This afternoon we got the minutes from the last Federal Open Market Committee meeting which took place a few weeks ago. This was the meeting where the Federal Reserve did what is now being described as probably the biggest policy shift in the history of the Fed. This was really an abrupt about-face, where they went from "Everything is great; we're going to keep on raising interest rates, and we are on auto-pilot - we are going to let the balance sheet continue to decline." All of a sudden, now they're "patient", meaning they're not going to raise rates at all in the foreseeable future, and not only is the balance sheet reduction program no longer on auto pilot, but it is now going to end prematurely sometime this year.Fed Balance Sheet North of $4 Trillion Of course, the balance sheet is still north of $4 trillion, and if the reduction program comes to an end this year, you're still going to be talking about a balance sheet $3.5 to $4 trillion in size. This would mean that almost all of the mortgages and treasuries which the Federal Reserve purchased in the aftermath of the 2008 financial crisis as part of its Quantitative Easing Programs, 1,2&3. Almost all of that debt will remain on its balance sheet after the Fed has finished shrinking it. Also, FOMC officials are now talking about Quantitative Easing once again as just another tool in the Fed's tool box. It's no longer something that will pulled out for an emergency, it's just going to be a normal policy tool for the Fed to deal with recession. Of course, that's going to be their main tool, given that this next recession is going to start when interest rates are at 2.25%. So there is not a lot of room for the Fed to try to artificially stimulate the economy when it hardly has any room to reduce rates.Quantitative Easing is Debt Monetization Of course, what does that mean about the Fed's balance sheet? That means the balance sheet will ultimately be much higher than it was when it began its current Operation Quantitative Tightening. We will be higher than we were before it started. All this does is confirm what I've been saying all along, that Quantitative Easing is Debt Monetization.

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